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The Boston Globe


Volcker Rule ready for vote; lawyers gear up for fight

NEW YORK — Even as five regulatory agencies prepared to vote Tuesday on a regulation that seeks to rein in risk-taking on Wall Street — an effort known as the Volcker Rule — lawyers and lobbyists were gearing up for another round of attacks against it.

In recent letters and meetings with financial regulators, lobbyists for Wall Street banks and business trade groups issued thinly veiled threats about challenging the Volcker Rule in court, people briefed on the matter said. The groups, including the US Chamber of Commerce, are hinting that they could use litigation to either undercut or clarify the rule, which is intended to bar banks from trading for their own gain and limit their ability to invest in hedge funds.

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The rule is aimed at preventing future trading blowups on Wall Street. In July, Treasury Secretary Jacob J. Lew instructed the agencies drafting the Volcker Rule — the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency — to finish the work by year’s end.

Over the past few months, the agencies overcame internal squabbling to draft identical versions of the rule, according to the people briefed on the matter, who were not authorized to speak publicly, and have scheduled votes for Tuesday. The agencies have written a tougher-than-expected final text despite two years of persistent prodding and pushing from Wall Street lobbyists to water down major provisions of an October 2011 draft version.

Wall Street also urged them to slow down, even as banks prepared to comply. In a Dec. 4 letter to the heads of the five agencies, the US Chamber of Commerce, the Business Roundtable, and three other business trade groups wrote, “It is more important to get the Volcker Rule right than meet an artificially imposed deadline.”

But the Chamber is unlikely to rush into court. The Federal Reserve will delay the effective date of the rule to July 2015, the people briefed on the matter said, a move that will probably postpone any litigation for several months while bank lawyers study the rule’s nuances.

Still, Wall Street is wasting no time to find end runs. Come Tuesday, hundreds of lawyers will pore over the details of the final draft, searching for loopholes and outlining for banks how they can comply with the law while still taking risks.

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